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Apple, Amazon Lost Some Institutional Holders in Late 2018 Rout

(Bloomberg) -- Institutional ownership of large-capitalization technology and Internet stocks fell in the fourth quarter, with the average portfolio reducing its allocation to the sector amid a sharp decline in share prices.

According to Morgan Stanley, ownership for the group fell in the December quarter to its lowest level since the second quarter of 2017, with institutions modestly lowering their exposure to Apple, Amazon.com and Facebook, along with Oracle and IBM. This more than offset higher ownership of names like Microsoft, Google-parent Alphabet and Qualcomm, according to the investment bank.

The fourth quarter was brutal for many tech bellwethers. Apple shares shed more than 30 percent over the period, while Amazon fell 25 percent; it was the worst quarterly performance for both stocks since 2008. Facebook lost 20 percent in the final three months of 2018, its biggest quarterly percentage loss since 2012.

Ownership of Apple fell 50 basis points on a quarter-over-quarter basis, dropping to 2.4 percent, “the lowest level of institutional ownership since C2Q17,” Morgan Stanley analysts led by Katy Huberty wrote to clients. This was the largest quarter-over-quarter decline since the fourth quarter of 2012.

At the same time, Apple’s weighting in the S&P 500 fell by 80 basis points to 3.4 percent, Huberty wrote, “implying the spread between Apple’s S&P weighting and ownership levels (96bps) contracted to less than 1 percent for the first time since 2016.” The share-price losses in the quarter resulted in Apple losing its status as the most valuable stock on Wall Street, although it has regained it for brief periods.

“A number of factors led investors to take profits or reduce positions” in Apple, Morgan Stanley wrote, citing “multiple iPhone suppliers cutting guidance,” “elevated US/China trade tensions and concerns around macro uncertainty,” and unfavorable court rulings in the company’s dispute with Qualcomm.

Morgan Stanley, which has an overweight rating and $197 price target on Apple, wrote that “investor sentiment/positioning became overly negative” in the quarter, and that it expects a year-to-date rebound in the stock “will be reflected in institutional ownership levels exiting the March quarter.”